To ascertain the prevalence of soft budgets and to find causes of softness, we surveyed Mongolian enterprises, asking whether state aid was expected when financial difficulties arose. One-quarter of enterprises expected soft-budgets, a large proportion of which have central government ownership. We examine causes of soft budgets in addition to state ownership, but the central government variable dominates. These results are confirmed when using instrumental variables or bivariate probit to unmask unmeasured selection effects. Local government ownership has a much weaker effect than does central ownership, suggesting the crucial role of decentralization.
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Paper provided by University of Maryland, Department of Economics in its series Electronic Working Papers with number
98-002.
Length: 39 pages Date of creation: Oct 1998 Date of revision: Handle: RePEc:umd:umdeco:98-002
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Find related papers by JEL classification: P11 - Economic Systems - - Capitalist Systems - - - Planning, Coordination, and Reform P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
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